Question
A family friend is retiring from work in the U.S. She is exactly 62 years old right now (time 0) and has the choice of
A family friend is retiring from work in the U.S. She is exactly 62 years old right now (time 0) and has the choice of taking her Social Security (a public pension program) right now or delaying according to the following schedule:
I. Early retirement (Age 62 exactly) $800 per month for life
II. Regular retirement (Age 66 years, 2 months) $1,000 per month for life
III. Delayed retirement (Age 70 exactly) $1,240 per month for life
If her expected life expectancy is 80 years old (exactly), what are the present values of the choices? (Assume r = 6% (annual))
(What exactly are the equations necessary to solve this?) Clearly answered please.
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